The rally got ignited by the fiscal cliff deal on New Year´s Eve (the perfect gift for my wedding on this day) and received a lot of tailwinds from beneficial macroeconomic news from China & US.
Yesterday we learned that the US generated 155 K new jobs in December. This number is perfect for the stocks because the job growth is strong enough to generate more income to finance the growing consumer spending. But the number isn´t strong enough to induce a rise of the interest rates which are now close to zero. Hence the monetary policy should continue fueling the rally on the stock markets.
I am also encouraged by the ISM Non-manufacturing index which showed that the US service sector (the largest part of the economy) accelerated its growth in December (calculatedriskblog). The solid numbers prove that the US is still on a sound growth path and is doing much better than the majority believes.
I reckon that the fireworks will continue this year. I believe that the economic growth in the US & China will continue and maybe even accelerate. This should reanimate the ailing economy in Europe.
Next week the focus should change to the company numbers because of the starting earnings season. On Tuesday Alcoa is expected to be the first large company which reports profits & revenue from Q4 2012. I reckon that most of the S&P 500 companies will beat the the predictions of the analysts because the majority oft them is too pessimistic. I further believe that the average of the companies will provide a solid profit growth thanks to the rapid technological progress which strengthens their efficiency and reduces the costs.
Rising company profits and a healing global economy accompanied by record low interest rates are a strong fundament for further gains on the stock market. Enjoy!
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